The Organization for Economic Cooperation and Development (OECD) on Tuesday cut its forecast for economic growth in the eurozone and recommended the joint issuance of Eurobonds alongside other measures.
The OECD sees eurozone GDP shrinking by 0.1% this year, down from its previous forecast of growth of 0.2%. It sees growth of 0.9% in 2013, down from its previous outlook of 1.4%.
The Paris-based organization said it expects the jobless rate to rise to 11.1% by the end of next year, from just over 10% now.
The OECD sees GDP shrinking by more than 1.5% in Spain and Italy this year. It forecast even sharper contractions of 5.3% in Greece and 3.2% in Portugal this year, but says both will start growing again in the second half of 2013.
It has forecast a rosier outlook for the 'core' economies of France and Germany, both of which it expects to grow for the next two years.
The OECD said that elections in a number of eurozone countries signal a rise in reform fatigue.
The OECD warned that a combination of enduring financial fragility, rising unemployment and social pain may spark political contagion and adverse market reaction.
The OECD said that fiscal consolidation and structural measures must proceed hand-in-hand to make the process as growth friendly as possible.
The OECD forecast US GDP growth of 2.4% this year and 2.6% in 2013. Japan is forecast to expand 2% in 2012 and 1.5% in 2013.
China's economic growth is likely to slow to 8.2% this year, its weakest in more than a decade, before recovering to 9.3% in 2013, the OECD said today. That is still higher than a government target of 7.5% for 2012.
The OECD cut its growth forecast for the world's second-largest economy from its November projection of 8.5%.